Lee v. Butler

• Decision Date: 12 January 1897
• Parties: LEE v. BUTLER.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

167 Mass. 426
46 N.E. 52

LEE
v.
BUTLER.

Supreme Judicial Court of Massachusetts, Berkshire.

Jan. 12, 1897.

Appeal from supreme judicial court, Berkshire county; Marcus P. Knowlton, Judge.

Claim by William Blackstone Lee against Prescott Hall Butler, as administrator of the estate of John Swann, deceased. From the decision of the commissioners appointed to examine claims against the estate both parties appeal. Reported to the full supreme judicial court. Judgment for claimant.

[46 N.E. 53]

The report is as follows: “The administrator's intestate, John Swann, executed the contract of guaranty, a copy of which is hereto annexed, marked ‘A.’ The original may be referred by either party. At that time a negotiation was pending between the claimant, Lee, and Swann, who acted as the representative of the Phoenix Iron & Coal Company, a corporation established under the laws of Georgia in the United States of America, for a loan of money by the claimant to the corporation to be secured by mortgage bonds on property in Georgia. It was proposed that the claimant and others should advance moneys as a temporary loan, and should receive as security bonds to an amount much larger than the sum lent, and that the claimant should be paid interest at the rate of ten per cent. per annum upon the principal, and also a bonus of twenty per cent. of the principal. The claimant declined to make an advance unless Swann would give his personal guaranty for the payment of the principal and interest. Swann thereupon executed a guaranty, and inclosed it to the claimant, on March 18, 1873, in a letter, a copy of which is hereto annexed, marked ‘B.’ Subsequently the claimant advanced to Swann, for the corporation, under this arrangement, £4,500, and took Swann's receipt for it, a copy of which is hereto annexed, marked ‘C.’ The stipulation referred to in the guaranty by the words ‘as stipulated’ was oral. Interest at ten per cent. was paid on the loan for two years by the corporation, according to the stipulation, and the corporation paid nothing afterwards. In 1880 an arrangement was made between the plaintiff and Swann that Swann should pay interest at the rate of 2 1/2 per cent. from that time on the principal of the loan until some adjustment of the matter should be made, and he accordingly paid £56. 5s. 0d. semiannually as per the credits given in the account, until a short time before his death, in 1890. Bonds of the corporation amounting in the aggregate to £20,000, being 100 bonds of £200 each, issued by the corporation, bearing date July 1, 1873, and payable July 1, 1878, with interest at ten per cent. per annum, secured by a mortgage on real estate in Georgia, and being part of an issue amounting to £100,000, were received from the corporation as security for the claimant's loan and for a loan of £>>500, made by one Bailey, a friend of the plaintiff. These bonds were never in the claimant's hands, but were allowed by him to remain in the hands of Swann, as his agent, in whom he had great confidence. Swann and one James M. Smith were the mortgagees to whom the conveyance was made as trustees for the bondholders. Smith resigned his trust, and Swann, as sole trustee, at the request of bondholders, in 1884 proceeded to foreclose the mortgage, and under an order of court sold the mortgaged property to himself as an individual for the nominal sum of $5,000, and held the title in his own name without anything of record to disclose the existence of a trust until his death. In fact, however, he was acting for the bondholders in all the proceedings. No money was paid as a consideration for the sale, and he always recognized the rights of the bondholders as cestuis que trustent. Since his death, proceedings have been commenced by the claimant and others, and carried to a final decree, in the court in Georgia, whereby the claimant and others are put in possession of the property as trustees for all the bondholders. So far as the claimant's rights are concerned, it was understood by Swann that what he did in procuring a foreclosure and holding and managing the property was without prejudice to his obligation, if any existed, under his guaranty. At one time, when the claimant signed his consent to a proposed conveyance after the foreclosure, it was done under an express stipulation that he should not thereby be affected in his rights under the guaranty, and Swann in different ways recognized his obligation to the claimant under the guaranty during the last years of his life, and never denied it. The contracts relied on by the claimant were made in England between English subjects. There was no writing to show the contract between the claimant and the corporation in regard to the loan. When the guaranty was received by the claimant, the sum written in it was £>8,000. At some time he crossed out the figures ‘£8,000,’ and inserted ‘£6,000.’ On April 16, 1880, the claimant wrote a letter, a copy of which is hereto annexed, marked ‘D.’ A copy of the affidavit he filed with the commissioners regarding his claim is hereto annexed marked ‘E.’ He testifies as follows: ‘I altered the sum named in the guaranty from £8,000 to £ 6,000, as it seemed to me that Mr. Swann had made a mistake. I think I must have included Mr. Bailey's £500, which of course, was a mistake on my part. The sum should be £5,400, as shown already, being the

[46 N.E. 54]

money actually advanced with bonus.’...